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Hudson v. Libre Technology Inc.

United States District Court, S.D. California

November 13, 2019

EBONY HUDSON, an individual and on behalf of all others similarly situated, Plaintiff,
v.
LIBRE TECHNOLOGY INC., doing business as Student Loan Service, Docupop, and Student Loan Service, US; ANTONY MURIGU; JASON BLACKBURN; and BRIAN BLACKBURN, Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART PRELIMINARY APPROVAL OF PROPOSED CLASS SETTLEMENT [ECF No. 28.]

          Hon. Gonzalo P. Curiel United States District Judge.

         Before the Court is Plaintiff Ebony Hudson's unopposed Motion for Preliminary Approval of Class/Collective Action Settlement in a wage and hour dispute. (ECF No. 28.) The Settlement provides for a gross settlement amount of $425, 000.00, to be distributed as follows: up to $127, 500.00 in attorneys' fees, $15, 000.00 for litigation costs, $6, 000.00 to Plaintiff as an incentive award, $5, 500.00 to the proposed claims administrator, $21, 250.00 in Private Attorney General Act (“PAGA”) penalties, and the rest to be allocated on a pro rata basis to the participating Class Members based on the hours worked during the class period. Plaintiff predicts that the Settlement would result in a $2, 361 check (before tax) for the average employee. (ECF No. 28-1, at 8; ECF No. 36, Kahima Decl. ¶ 21.) Prior to the hearing, the Court issued a tentative order denying in part and granting in part preliminary approval of proposed class settlement for litigant use only outlining potential areas of deficiencies in the proposed settlement. A hearing was held on August 23, 2019. (ECF No. 35.) Trenton Kashima, Esq. appeared on behalf of Plaintiff and Matthew Sgnilek, Esq. appeared on behalf of Defendants. (Id.) After a review of the briefs, supporting documentation, the applicable law, and hearing oral argument, the Court GRANTS in part and DENIES in part the Motion for Preliminary Approval of Class/Collective Action Settlement.

         I. BACKGROUND

         A. Plaintiff's Claims

         On June 21, 2018, Plaintiff Ebony Hudson brought this putative Rule 23 class action/FLSA collective action against Defendants Libre Technology, Inc., Anthony Murigu (its owner), Jason Blackburn (its Chief Operating Officer), and Brian Blackburn (Director of Operations) for violations of California laws and the Fair Labor Standards Act (“FLSA”). (ECF No. 1.)

         On April 12, 2019, the Court granted a joint request to allow Plaintiff to file a first amended complaint (“FAC”). (ECF No. 23.) According to the FAC, Plaintiff was employed by Defendants as a “Member Success Coordinator, ” or “Agent, ” responsible for making calls to prospective customers and assisting individuals in applying for student loan consolidations and repayment programs. Plaintiff alleges that Defendants failed to pay coordinators for the time required to startup, login, and sign out of their computer systems before starting and ending their day. As a result, Plaintiff and other coordinators were required to work off the clock when booting up and shutting down their computer systems. In addition, Plaintiff alleges that Defendants failed to pay its coordinators the entire amount due under its commission-based compensation system, failed to include bonus pay when calculating the regular rate of pay, failed to pay for all overtime hours, and failed to provide Plaintiff and other coordinators with uninterrupted, work-free 30-minute meal periods and paid 10-minute rest breaks.

         On the basis of these allegations, Plaintiff's FAC raises the following claims: (1) agents were not paid for all wages and overtime due during their employment pursuant to the Fair Labor Standards Act, 29 U.S.C. § 201 et seq.; (2) agents were not paid minimum wage and regular wages for all hours worked pursuant to California Labor Codes §§ 223, 1194, 1197, 1197.1 and IWC Wage Order 4; (3) agents were not paid overtime pursuant to California Labor Codes §§ 510, 1194, 1198 and IWC Wage Order 4; (4) agents were subject to unlawful deductions in violation of California Labor Codes §§ 221 and 223; (5) agents were not provided rest and meal periods pursuant to California Labor Codes §§ 226.7 and 512; (6) agents were not timely paid wages owed in accordance with California Labor Codes §§ 202, 203, and 203; (7) Defendants failed to provide accurate wage statements in accordance with California Labor Code § 226; (8) Defendants engaged in unfair competition in violation of California's Unfair Competition Law, Business and Professions Code section 17200 et seq.; (9) Defendants breached the covenant of good faith and fair dealing; and (10) that by engaging in these alleged practices, Plaintiff and all others similarly situated were entitled to recover penalties pursuant to the Private Attorney General Act (“PAGA”) pursuant to California Labor Code § 2698.

         2. Negotiations, Early Disclosure, and Mediation

         Plaintiff is represented by Trenton Kashima, of Finkelstein & Krinsk LLP, and Kevin J. Stroop, of Sommers Schwartz, PC (hereinafter “Class Counsel”).

         Shortly after the filing of the original complaint, Class Counsel began exploring the possibility of settlement with the Defendants, each of whom filed answers denying allegations of wrongdoing. As a result of these settlement talks, the parties engaged in early informal disclosure of information, during which time Defendants indicated that there were 108 putative class members. Defendants provided Class Counsel with payroll information and timeclock entries for a sample of 30% of the putative class, or 34 employees.

         Based on this sample, Plaintiff observed that all Class Members worked overtime, that is, more than 8 hours in a day or 40 hours in a week, and estimates one and three meal and rest break violations per Class Member per week. (ECF No. 28-2, at 5 (Decl. of Trenton R. Kashima, dated June 5, 2019).) Class Counsel used Defendants' sample data to develop several class-wide damages models, estimating that a favorable judgment would realistically range from two to five million dollars, including statutory penalties and treble damages if Plaintiff's class action was successful at trial. (Id.)

         On January 24, 2018, the parties attended a full-day mediation session with Steven Rottman, a mediator who Plaintiff alleges has extensive experience with wage and hour cases. At the conclusion of the mediation, the parties signed a memorandum of understanding detailing the material terms of the Settlement. (Id. at 6.) Thereafter, the parties jointly moved to allow Plaintiff to amend her complaint to add additional claims as to lunch break violations uncovered during the course of the parties' settlement discussions. (Id.) This filing resulted in the FAC, i.e., the operative complaint. (ECF No. 23.)

         3. Proposed Settlement

         On June 6, 2019, Plaintiff filed the instant unopposed Motion for Preliminary Approval of a Class Action Settlement and Certification of Settlement Class. (ECF No. 28.) She seeks, inter alia, Rule 23 preliminary class certification for a Settlement Class comprised of:

all persons who, during the Class Period, have previously been or currently are employed in California by Libre Technology, Inc. dba Student Loan Service, Docupop, and Student Loan Service, US, as an hourly-paid ‘non-exempt' employee from June 21, 2014, [1] to the date of Preliminary Approval.

(ECF No. 28-1, at 11.) She also seeks preliminary approval for the terms of a settlement agreement reached with Defendants and executed on May 23, 2019 (hereinafter “Settlement”).[2]

         Pursuant to the Settlement, Defendants agree to pay $425, 000.00, i.e., the “Gross Settlement Amount” in exchange for the release and waiver of all the claims asserted in the FAC, as well as any claims that could have, or should have, been pleaded therein. Plaintiff proposes the following allocation of the Gross Settlement Amount: $127, 500.00 as attorneys' fees, $15, 000.00 for litigation costs, $6, 000.00 to Plaintiff as an incentive award, $5, 500.00 to the proposed claims administrator (Phoenix Settlement Administrators), $21, 250.00 in PAGA penalties (with 75%, or $15, 937.50, to be paid to the California Labor Workforce and Development Agency (“LWDA”), and the remaining 25%, or $5, 312.50, to be returned to the settlement fund), and the rest to be allocated on a pro rata basis to the participating Class Members.

         After subtracting from the Gross Settlement Amount the amounts enumerated above, Class Members stand to share a recovery of $255, 062.50, or, the “Net Settlement Amount.” (ECF No. 28-2, at 7.) To calculate a Class Member's pro-rata share, the Net Settlement Amount will be divided by the total number of work weeks for all Settlement Class Members, resulting in the “Workweek Value.” The Settlement Class Member's payment will be determined by multiplying the Workweek Value by the number of weeks worked by the Class Member during the Class Period. (ECF No. 28-2, at 7.) Plaintiff predicts that the Settlement would result in a $2, 361 check (before tax) for the average employee. (Id. at 8.) It was estimated that potential liability, if successfully litigated, could fall in the range of $2 to $5 million. (Id. at 10.)

         According to the Settlement, the parties will cause the Settlement Administrator to issue checks to all participating Class Members after the close of the agreed-upon opt-out period. (ECF No. 28-5, at 20.) The back of these checks will provide a statement advising that Class Members who endorse the check by signing and depositing the check will opt-in to a FLSA release. (Id. at 27.) “Any class member who does not opt-out of the Settlement but does not cash their checks shall be deemed to waive all claims under the settlement that were or could have been pled in the operative complaint . . . except for a claim under the Fair Labor Standards Act.” (Id.)

         Any unclaimed settlement funds will escheat to the State until it is claimed. No portion of the Settlement fund will revert to the Defendants.

         At the hearing, Plaintiff's counsel explained that there were errors in the calculations he proposed in his declaration in support of preliminary approval. Thereafter, counsel submitted a supplemental declaration clarifying that the reasonable estimate of the total liability would range between $554, 441.12 and $920, 309.70, (Dkt. No. 36 at 8), instead of the estimated $2 to $5 million proposed in the motion, (ECF No. 28-1 at 25). Counsel also explained that while Defendants agreed to produce 30% (or 34) of the class members' payroll information, the sample set was selected randomly, by selecting every third name from the list to ensure that neither party could “cherry-pick” the data set. (ECF No. 36 at 3.) Moreover, Plaintiff confirmed the accuracy of the records by comparing her experiences to her own employee records and employee records of others. (Id.)

         II. DISCUSSION

         Plaintiff's motion requests preliminary certification of a Rule 23 class as well as preliminary approval of settlement terms. The Court will address first the request for certification, and then the fairness of the terms of the Settlement.

         A. General Standards

         The Ninth Circuit has a strong judicial policy that favors settlements in class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 168, 1276 (9th Cir. 1992). However, when the parties settle before class certification, the court must “peruse the proposed compromise to ratify both the propriety of the certification and the fairness of the settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). The Court must first assess whether the proposed class meets the certification requirements and then whether the proposed settlement is “fundamentally fair, adequate, and reasonable.” Id.

         “[S]ettlements of collective action claims under the FLSA also require court approval.” Nen Thio v. Genji, LLC, 14 F.Supp.3d 1324, 1333 (N.D. Cal. 2014). “The FLSA establishes federal minimum-wage, maximum-hour, and overtime guarantees that cannot be modified by contract.” Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 69, (2013). Since an employee cannot waive claims under the FLSA, an FLSA claim “may not be settled without supervision of either the Secretary of Labor or a district court.” Nen Thio, 14 F.Supp.3d at 1333. When confronted with a motion to settle an FLSA claim, the court “must determine whether the settlement is a fair and reasonable resolution of a bona fide dispute. If a settlement in an employee FLSA suit does reflect a reasonable compromise over issues, such as FLSA coverage or computation of back wages, that are actually in dispute, the district court may approve the settlement in order to promote the policy of encouraging settlement of litigation.” Id. (internal punctuation and citations omitted).

         B. Class Certification under Rule 23

         The Court will first address whether Plaintiff's proposed settlement class meets the standard for preliminary class certification.

         When ruling on class certification in the settlement context, the court “must pay undiluted, even heightened, attention to class certification requirements because, unlike in a fully litigated class action suit, the court will not have future opportunities to adjust the class, informed by the proceedings as they unfold.” Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 620 (1997).

         i. Proposed Settlement Class

         Plaintiff seeks provisional certification for the following class for settlement purposes only:

all persons who, during the Class Period, have previously been or currently are employed in California by Libre Technology, Inc. dba Student Loan Service, Docupop, and Student Loan Service, US, as an hourly-paid ‘non-exempt' ...

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